RBI eases prepayment guidelines of ECBs
By Our Banking Bureau | 06 Aug 2002
Mumbai: The Reserve Bank of India has eased norms allowing prepayment of external commercial borrowings (ECBs) under the automatic route on an “experimental basis.”
The RBI says prepayment of ECBs will be allowed without any limit in cases where the amount of repayment is fully matched by way of inflow of foreign exchange in the form of foreign investment in the applicant company.
Prepayment without any limits will also be allowed on ECBs made out of balances held in the Exchange Earner’s Foreign Currency Account of the borrower. Borrowers can also now prepay an ECB to the extent of 10 per cent of the outstanding loan up to $50 million without RBI approval.
Prepayments where the residual maturity of the loan does not exceed one year have also been allowed up to $50 million without prior RBI approval. The RBI says this move is aimed at simplifying procedures and extending facilities under the automatic route and will be available for prepayment of ECBs up to 31 December 2003.
The RBI has directed all designated branches of authorised dealers to allow such remittances for prepayment of ECBs after obtaining a certificate from auditors indicating that the applicant:
- is eligible for prepayment under the automatic route;
- has availed of the ECB in accordance with all relevant acts, rules, regulations and guidelines; and
- has submitted the ECB-2 returns to the RBI.
A new circular will be issued on or before 31 December 2003 in case the scheme needs to be extended for a further period.
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